Going to market? Who will a buyer want as key employees in a transaction?

By July 9, 2021September 11th, 2021No Comments

The answer is simple! Any manager you consider essential is most likely important to the buyer.

As you consider going to market with your business, whether it is because you are planning retirement or just contemplating your next venture, there are a number of key steps that you should be aware of as you prepare to sell your company.

Recently we talked about the importance of financial performance. Buyers want to know how profitable the business is, and if there is a recurring revenue stream. That’s very important to prospective buyers. But what is also important is the management team.

Will a new owner have to go out and find his/her own employees, or will your seasoned team remain with the company under new ownership? Key employees are a major value driver.

Whether the business is an HVAC company in Massachusetts, a machine shop in Rhode Island, a trucking or transportation company in Maine, or a home health care provider in New Hampshire, there are some common characteristics of businesses that make these businesses more appealing to buyers – and one of the big characteristics is “team.”

A new owner will not necessarily know the intricacies of how to manufacture the product or perform the service your company offers. Having a seasoned team remaining with the company sends a good signal to customers, the community, and will make the company attractive to more buyers and at a higher value.

Because a new owner wants as close to turnkey as possible, one step that you as business owner preparing your company for market can take is to solidify that your team will remain with the company after the sale. This may seem to be a double-edged sword, because most employers are somewhat hesitant to tell employees they are thinking of selling.  But you can take certain steps that will make your business more appealing to a prospective buyer by having employment contracts (and if appropriate, non-compete clauses) firmly in place. When you begin to market your business, highlight the strength of your team to a buyer. Consider “stay bonuses” for select key staff that will be paid a year after ownership transition, providing the key employees have not left the company.

There are other options available to maintain key employees through insurance and other vehicles.  If you decide, based on the personalities of key employees, to not have a discussion up front with them, that is understandable and not at all uncommon.   Please be aware that the issue will still come up in almost all cases, prior to closing.  Buyers almost always will want to secure employment agreements prior to closing with someone they deem imperative to the business. The key is to talk with a business intermediary like ROI corporation IN ADVANCE of marketing the business.  Even in a short time before going to market, ideas can be implemented to stabilize and increase the value of a business.  We have sold many, many companies over the years and are happy to provide guidance once we confidentially understand more about an owner’s situation.

And of course, keep your team happy by rewarding them appropriately for work well done and by motivating them to behave in alignment with company objectives. A buyer will be impressed if your business has a team that has longevity, expertise and are all pulling in the same direction.  For example, good HVAC technicians may be worth their weight in gold, and the right team of CDL truck drivers or healthcare personnel are as well. We’ve worked with many different businesses across a wide range of industries. If you are interested in knowing what others have done to shore up their team, and their company in preparation for a sale, give us a call! Let us help advise you on how to be sure that your team is well poised to be an asset when your business goes to market.

it is a busy time in the marketplace. There are not enough businesses for sale to satisfy the number of buyers in the marketplace currently.  It is, in fact, the best time to sell in my long career in business brokerage. If we can help you evaluate the worth of your business or assist with your plans to prepare, give us a call!   Lastly we always recommend you consult your attorney and CPA, as well as a qualified business intermediary, before making major decisions discussed in this blog post.

By; Gary Rayberg, CBI, M&AMI, President of ROI Corporation. Offering business brokerage, consulting and valuation services  since 1997. Cell 781-858-1030.   Gary has been involved in the sale of dozens of companies in recent years and is available to confidentially discuss your business value.   ROI has sold business and real estate in over 30 states. They operate an M&A Division that specializes in manufacturing, service, and distribution businesses with sales of $3,000,000 to $50,000,000 annually.

Contact Gary today for a no obligation, confidential discussion about the options for exiting and the value of your Company.   www.roimergers.com